Trade Offs

[snarlcakes]

Sargon actually gives an old school liberal answer on why tariffs are beneficial. Putting aside whether she is correct or not, she is addressing the underlining problem that has plagued America the past 30 years and why there is so much division, in my opinion. Globalization and immigration has been great for cheaper goods, cheaper labor, and capital inflows into the U.S., but has been a terrible deal for the middle class in the U.S.

I personally don’t think tariffs will do much about it because the issue is structural, but I do applaud Trump for trying (assuming that is part of his reason for them). The U.S. benefitted greatly from Bretton Woods agreement and so did the world, but it’s no longer in the U.S. best interests. We need a a monetary reset and a neutral reserve asset like gold or Bitcoin (my choice obviously). If we don’t these issues that plague the U.S. are only going to get worse and we’re going to end up with more division.

 

[JamieDimonsBalls]

This ignores value. The only reason people argue about car manufacturing (which China is not a Top 2 importer now) is nostalgia.

PPE products are very low value (low complexity, high volume, low margin). Same with most pharma products.

We don’t want to manufacture everything. Why does nobody understand comparative advantage any longer?

 

[twenty02]

Tax our way to prosperity. Definitely no more old school liberal than that line of thinking.

 

[snarlcakes]

This ignores value. The only reason people argue about car manufacturing (which China is not a Top 2 importer now) is nostalgia.

PPE products are very low value (low complexity, high volume, low margin). Same with most pharma products.

We don’t want to manufacture everything. Why does nobody understand comparative advantage any longer?

How much of the comparative advantage comes from not being the world reserve currency?

 

[snarlcakes]

Tax our way to prosperity. Definitely no more old school liberal than that line of thinking.

True, but they’re also doing tax cuts, cutting regulations, and government cuts.

 

[twenty02]

True, but they’re also doing tax cuts, cutting regulations, and government cuts.

The tax 'cuts' are just an extension of current tax policy.

 

[crazed_hoosier2]

This ignores value. The only reason people argue about car manufacturing (which China is not a Top 2 importer now) is nostalgia.

PPE products are very low value (low complexity, high volume, low margin). Same with most pharma products.

We don’t want to manufacture everything. Why does nobody understand comparative advantage any longer?

CA is literally like the first week or two in macroeconomics.

And it’s frustrating that more people don’t understand why that is a net positive.

They don’t understand balance of payments, either. They hear “trade deficit” and it just turns into “China is stealing from us.”

 

[crazed_hoosier2]

The tax 'cuts' are just an extension of current tax policy.

Mostly.

But there are several key changes being sought - none of which are wise.

- Elimination of taxes on tips, overtime, and SS benefits (which is sheer brainless Trumpian populism)

- Some kind of hike in the SALT deduction cap (which is a sop to donors…and would almost exclusively benefit high earners).

 

[TyWebbIU]

This ignores value. The only reason people argue about car manufacturing (which China is not a Top 2 importer now) is nostalgia.

PPE products are very low value (low complexity, high volume, low margin). Same with most pharma products.

We don’t want to manufacture everything. Why does nobody understand comparative advantage any longer?

We don’t want to have to rely on other countries for things we need. Especially China.

This would include…

-rare earth elements

-pharmaceutical elements

And so on.

 

[IUCrazy2]

CA is literally like the first week or two in macroeconomics.

And it’s frustrating that more people don’t understand why that is a net positive.

They don’t understand balance of payments, either. They hear “trade deficit” and it just turns into “China is stealing from us.”

The problem is that the benefits haven't really "trickled down" to that mid to lower middle class worker. "You can buy a cheaper shirt" isn't a substitute for "you can more comfortably pay your bills."

Losing manufacturing like described above because of CA isn't so much the issue as there was no comparable replacement for those jobs.

 

[snarlcakes]

CA is literally like the first week or two in macroeconomics.

And it’s frustrating that more people don’t understand why that is a net positive.

They don’t understand balance of payments, either. They hear “trade deficit” and it just turns into “China is stealing from us.”

We have a centralized monetary system. There are trade offs for being the world reserve currency. A lot of those trade offs benefit the top at the expense of the middle class. Claiming we have a free market and saying something about comparative advantage doesn’t address the issues.

 

[crazed_hoosier2]

The problem is that the benefits haven't really "trickled down" to that mid to lower middle class worker. "You can buy a cheaper shirt" isn't a substitute for "you can more comfortably pay your bills."

Losing manufacturing like described above because of CA isn't so much the issue as there was no comparable replacement for those jobs.

It may not feel like it, and I understand that. But this chart would argue otherwise.

You can’t examine all how well somebody is doing without including prices of the things they buy.

 

[snarlcakes]

The problem is that the benefits haven't really "trickled down" to that mid to lower middle class worker. "You can buy a cheaper shirt" isn't a substitute for "you can more comfortably pay your bills."

Losing manufacturing like described above because of CA isn't so much the issue as there was no comparable replacement for those jobs.

The GOP foolishly chose to pretend we have free markets and there are no negative outcomes for, being the world reserve currency, globalization, immigration (prior to Trump), and endless wars. It’s why their party got hijacked by Trump. They were all getting extremely wealthy off of it. Fun fact: since 1971 the average price for a share of the S&P 500 is up 8x. If the averaged wage would have kept up it would be over 200 dollars (I couldn’t locate the exact numbers, but they’re close).

 

[hookyIU1990]

The problem is that the benefits haven't really "trickled down" to that mid to lower middle class worker. "You can buy a cheaper shirt" isn't a substitute for "you can more comfortably pay your bills."

Losing manufacturing like described above because of CA isn't so much the issue as there was no comparable replacement for those jobs.

Why should we be OK with such a massive misallocation of capital in an effort to keep low value manufacturing jobs?

That's not any different than the argument that energy policies should be used to shutter coal plants and mining or mandates for EV adoption. It's a distortion of the market and effective/efficient flow of capital in markets.

 

[IUCrazy2]

It may not feel like it, and I understand that. But this chart would argue otherwise.

You can’t examine all how well somebody is doing without including prices of the things they buy.

That chart is great and all but the median family income in 1971 was $10,290 which is roughly $81,000 in today's dollars. The median now is around $78,000. And that was with women participating less than they do now.

 

[twenty02]

We have a centralized monetary system. There are trade offs for being the world reserve currency. A lot of those trade offs benefit the top at the expense of the middle class. Claiming we have a free market and saying something about comparative advantage doesn’t address the issues.

The USD is not the end all, be all. It's about 58% of foreign exchange reserves.

 

[GooglyMooglyWooglyBoogly]

View embedded media

Sargon actually gives an old school liberal answer on why tariffs are beneficial. Putting aside whether she is correct or not, she is addressing the underlining problem that has plagued America the past 30 years and why there is so much division, in my opinion. Globalization and immigration has been great for cheaper goods, cheaper labor, and capital inflows into the U.S., but has been a terrible deal for the middle class in the U.S.

I personally don’t think tariffs will do much about it because the issue is structural, but I do applaud Trump for trying (assuming that is part his reason IU g for them). The U.S. benefitted greatly from Bretton Woods agreement and so did the world, but it’s no longer in the U.S. best interests. We need a a monetary reset and a neutral reserve asset like gold or Bitcoin (my choice obviously). If we don’t these issues that plague the U.S. are only going to get worse and we’re going to end up with more and division.

This is an incomplete analysis. The U.S. doesn’t manufacture anymore but we are by leaps and bounds the leader of the world in software.

That includes much of the middle class who work in jobs either directly or tangentially related to software services.

The idea that you can’t have a healthy middle class without manufacturing is a fallacy imo.

 

[IUCrazy2]

Why should we be OK with such a massive misallocation of capital in an effort to keep low value manufacturing jobs?

Don't do it, but you have to replace them with something.

That's not any different than the argument that energy policies should be used to shutter coal plants and mining or mandates for EV adoption. It's a distortion of the market and effective/efficient flow of capital in markets.

Shipping in slave labor from the third world was a distortion of market rates too. You have to balance the markets with the well being of your populace.

 

[twenty02]

This is an incomplete analysis. The U.S. doesn’t manufacture anymore but we are by leaps and bounds the leader of the world in software.

That includes much of the middle class who work in jobs either directly or tangentially related to software services.

The idea that you can’t have a healthy middle class without manufacturing is a fallacy imo.

LMAO. The US is the 2nd largest manufacturer in the world. Nearly $3T a year in manufacturing output.

 

[GooglyMooglyWooglyBoogly]

LMAO. The US is the 2nd largest manufacturer in the world. Nearly $3T a year in manufacturing output.

Context of the conversation dummy. No one is saying we don’t manufacture at all.

 

[twenty02]

Context of the conversation dummy. No one is saying we don’t manufacture at all.

That's what you just said. People are confusing/conflating manufacturing output with manufacturing employment. Including the OP and the dumb woman linked

 

[hookyIU1990]

Shipping in slave labor from the third world was a distortion of market rates too. You have to balance the markets with the well being of your populace.

What slave labor are we shipping in?

 

[snarlcakes]

That chart is great and all but the median family income in 1971 was $10,290 which is roughly $81,000 in today's dollars. The median now is around $78,000. And that was with women participating less than they do now.

The charts aren’t great and don’t correctly measure inflation. It’s shitty data. Go check out what CPI has been the last 4 years and compare it to what you pay now for the same goods and serves. They’re not close.

 

[crazed_hoosier2]

That chart is great and all but the median family income in 1971 was $10,290 which is roughly $81,000 in today's dollars. The median now is around $78,000. And that was with women participating less than they do now.

Not according to the data I’m finding here.

Median HH income has gone from $68k to $80k, in 2024 dollars.

 

[mcmurtry66]

That chart is great and all but the median family income in 1971 was $10,290 which is roughly $81,000 in today's dollars. The median now is around $78,000. And that was with women participating less than they do now.

Parents bought their house in 71 for $17,500. Not even twice the med income. House today is worth about five times the median income now

 

[BradStevens]

CA is literally like the first week or two in macroeconomics.

And it’s frustrating that more people don’t understand why that is a net positive.

They don’t understand balance of payments, either. They hear “trade deficit” and it just turns into “China is stealing from us.”

Net positive doesn't matter to those bearing the brunt of the negative.

 

[BradStevens]

This ignores value. The only reason people argue about car manufacturing (which China is not a Top 2 importer now) is nostalgia.

PPE products are very low value (low complexity, high volume, low margin). Same with most pharma products.

We don’t want to manufacture everything. Why does nobody understand comparative advantage any longer?

No, the reason people argue about car manufacturing is because that industry created a lot of middle class jobs and wealth for people. Look at Detroit then vs. now.

Comparative advantage doesn't matter much to those who lost their jobs and way of life, JDB. You can't look at the net average, you have to dig deeper and see how it affects these people.

This isn't an anti-economic position, by the way. Russ Roberts--hardly a liberal--has discussed it and talked about it on his podcast quite a bit.

 

[BradStevens]

That chart is great and all but the median family income in 1971 was $10,290 which is roughly $81,000 in today's dollars. The median now is around $78,000. And that was with women participating less than they do now.

Much less.

 

[hookyIU1990]

No, the reason people argue about car manufacturing is because that industry created a lot of middle class jobs and wealth for people. Look at Detroit then vs. now.

Comparative advantage doesn't matter much to those who lost their jobs and way of life, JDB. You can't look at the net average, you have to dig deeper and see how it affects these people.

This isn't an anti-economic position, by the way. Russ Roberts--hardly a liberal--has discussed it and talked about it on his podcast quite a bit.

Perhaps the UAW leadership should have studied CA along with the Big 3.

 

[twenty02]

Net positive doesn't matter to those bearing the brunt of the negative.

I don't disagree. But the question is about the best policies for the nation as a whole, forward looking. Not policies that try to rewind to a different era.

Manufacturing output in the US continues to grow.

However manufacturing employment continues to fall.

Manufacturing sector employment U.S. 2023 | Statista

This statistic shows the number of private sector manufacturing employees in the United States from 1985 to 2023.

www.statista.com

But this isn't just a US phenomenon. Manufacturing employment in China is falling, as well.

This should be obvious to anyone that looks at the operations in a modern manufacturing facility, either here or there. Robotics will eventually replace all manufacturing employment outside of those that have advanced skills in designing, managing and fixing the robots.

Attempts to tighten up the supply chain, eliminating dependency on geopolitical adversaries is a worthwhile goal. Getting into trade wars with allies, based upon the premise of rebuilding domestic manufacturing employment is a complete fool's errand.

 

[BradStevens]

That's what you just said. People are confusing/conflating manufacturing output with manufacturing employment. Including the OP and the dumb woman linked

Right. So if you look at manufacturing jobs, not output, you see that we've had 40 years of contraction:

Forty years of falling manufacturing employment

Despite being a leading driver of employment growth for decades, manufacturing has shed employment over the past 40 years as the U.S. economy has shifted to service-providing industries. This article looks at the broad employment trends in manufacturing over the past 40 years, as well as the...

www.bls.gov

I don't think manufacturing is the end all, be all of employment (quite the opposite). But the fact is, our economy has changed--is changing--at a rate where I'm not sure the average person (remember, the avg. person has a 100 IQ) has nearly as much of a chance at sustaining a middle-class lifestyle as they used to.

Further, we shouldn't be surprised that people who feel left behind (regardless of the reason) will push for change or grasp onto the guy talking to them and telling them he can fix their problems. I believe this explanation is the best one for the rise of Trump and the loyalty/dedication of his base.

 

[BradStevens]

This is an incomplete analysis. The U.S. doesn’t manufacture anymore but we are by leaps and bounds the leader of the world in software.

That includes much of the middle class who work in jobs either directly or tangentially related to software services.

The idea that you can’t have a healthy middle class without manufacturing is a fallacy imo.

Do you believe that people with IQs of 85-100 can succeed in the software services industry?

 

[twenty02]

Right. So if you look at manufacturing jobs, not output, you see that we've had 40 years of contraction:

Forty years of falling manufacturing employment

Despite being a leading driver of employment growth for decades, manufacturing has shed employment over the past 40 years as the U.S. economy has shifted to service-providing industries. This article looks at the broad employment trends in manufacturing over the past 40 years, as well as the...

www.bls.gov

I don't think manufacturing is the end all, be all of employment (quite the opposite). But the fact is, our economy has changed--is changing--at a rate where I'm not sure the average person (remember, the avg. person has a 100 IQ) has nearly as much of a chance at sustaining a middle-class lifestyle as they used to.

Further, we shouldn't be surprised that people who feel left behind (regardless of the reason) will push for change or grasp onto the guy talking to them and telling them he can fix their problems. I believe this explanation is the best one for the rise of Trump and the loyalty/dedication of his base.

I agree with you. This has been discussed here many times for years. @Marvin the Martian probably talks about it most. The default position is that it will just resolve itself. Because historically it has. But I'm not really sure that it has over the last 40 years or so. Human history is full of really bad shit. We default to remembering the good.

 

[BradStevens]

I don't disagree. But the question is about the best policies for the nation as a whole, forward looking. Not policies that try to rewind to a different era.

Manufacturing output in the US continues to grow.

However manufacturing employment continues to fall.

Manufacturing sector employment U.S. 2023 | Statista

This statistic shows the number of private sector manufacturing employees in the United States from 1985 to 2023.

www.statista.com

But this isn't just a US phenomenon. Manufacturing employment in China is falling, as well.

This should be obvious to anyone that looks at the operations in a modern manufacturing facility, either here or there. Robotics will eventually replace all manufacturing employment outside of those that have advanced skills in designing, managing and fixing the robots.

Attempts to tighten up the supply chain, eliminating dependency on geopolitical adversaries is a worthwhile goal. Getting into trade wars with allies, based upon the premise of rebuilding domestic manufacturing employment is a complete fool's errand.

I think the problem there is that most people say that what's good for the "nation as a whole" is aggregate GDP. So it all comes down to how you define "nation as a whole."

I think I've used this analogy before, so pardon me if this is repetitive: if you have a policy that is going to goose aggregate GDP or use wealth if you like by 10% that sounds great, but if that means that 10% of the nation gets much richer while 40% stay the same and 50% are worse off, is that good for the "nation as a whole?" [The numbers are hypothetical, not a reference to real numbers].

Again, you can argue supply chain, geopolitical adversaries, etc. until you're blue in the face, but if you're arguing to a family where dad just lost his job, the factory is gone, everything in town is decrepit, etc., I don't think they really care that much. The city I grew up in (actually next to) is like this. The economist's response--just move to where there are better jobs, doesn't help much for these people. They value community and tradition or aren't well equipped to move. They're stuck there in a very real sense.

 

[twenty02]

I think the problem there is that most people say that what's good for the "nation as a whole" is aggregate GDP. So it all comes down to how you define "nation as a whole."

I think I've used this analogy before, so pardon me if this is repetitive: if you have a policy that is going to goose aggregate GDP or use wealth if you like by 10% that sounds great, but if that means that 10% of the nation gets much richer while 40% stay the same and 50% are worse off, is that good for the "nation as a whole?" [The numbers are hypothetical, not a reference to real numbers].

Again, you can argue supply chain, geopolitical adversaries, etc. until you're blue in the face, but if you're arguing to a family where dad just lost his job, the factory is gone, everything in town is decrepit, etc., I don't think they really care that much. The city I grew up in (actually next to) is like this. The economist's response--just move to where there are better jobs, doesn't help much for these people. They value community and tradition or aren't well equipped to move. They're stuck there in a very real sense.

I'm very aware of it. The signs of it are obvious all across the country. Particularly here in the Midwest.

 

[JamieDimonsBalls]

No, the reason people argue about car manufacturing is because that industry created a lot of middle class jobs and wealth for people. Look at Detroit then vs. now.

Comparative advantage doesn't matter much to those who lost their jobs and way of life, JDB. You can't look at the net average, you have to dig deeper and see how it affects these people.

This isn't an anti-economic position, by the way. Russ Roberts--hardly a liberal--has discussed it and talked about it on his podcast quite a bit.

So we should make policy decisions because of the feelings of a minority of people in the country who couldn’t adapt?

 

[twenty02]

So we should make policy decisions because of the feelings of a minority of people in the country who couldn’t adapt?

No. But we'd be wise not to totally ignore them either.

 

[Bub_rub]

View embedded media

Sargon actually gives an old school liberal answer on why tariffs are beneficial. Putting aside whether she is correct or not, she is addressing the underlining problem that has plagued America the past 30 years and why there is so much division, in my opinion. Globalization and immigration has been great for cheaper goods, cheaper labor, and capital inflows into the U.S., but has been a terrible deal for the middle class in the U.S.

I personally don’t think tariffs will do much about it because the issue is structural, but I do applaud Trump for trying (assuming that is part of his reason for them). The U.S. benefitted greatly from Bretton Woods agreement and so did the world, but it’s no longer in the U.S. best interests. We need a a monetary reset and a neutral reserve asset like gold or Bitcoin (my choice obviously). If we don’t these issues that plague the U.S. are only going to get worse and we’re going to end up with more division.

I don’t think a single economy can be good at making jet engines and also plungers. China is trying but they’re still much better at stuff lower on the supply chain. Their transition will be grueling. Developed economies grind the f*ck out of their working class with taxes, prices, regulation. But, as a whole, it’s much better to be the customer and not the one always looking for customers.

 

[IUCrazy2]

Parents bought their house in 71 for $17,500. Not even twice the med income. House today is worth about five times the median income now

Yes, it is things like that which have become the real barrier to entry. According to that chart middle income starts sub-$40,000. I would encourage anyone that lives in any Metropolitan area to go see what kind of house and where you would have to live for any house under $100,000. Even "affordable" metros like a Fort Wayne would have you living in neighborhoods that were considered well, rough, when I lived there 25 years ago and to get something under $150,000 means rough area, poor performing schools, and old house that needs work.

I think people feel like it is harder now because it actually is, particularly for those who have had to come into the market in the last decade.

 

[All4You]

Yes, it is things like that which have become the real barrier to entry. According to that chart middle income starts sub-$40,000. I would encourage anyone that lives in any Metropolitan area to go see what kind of house and where you would have to live for any house under $100,000. Even "affordable" metros like a Fort Wayne would have you living in neighborhoods that were considered well, rough, when I lived there 25 years ago and to get something under $150,000 means rough area, poor performing schools, and old house that needs work.

I think people feel like it is harder now because it actually is, particularly for those who have had to come into the market in the last decade.

While I agree with ya these days, I think you may be misremembering a little bit. In 2000, 150k would buy you a nice house in a nice area of the suburbs of Indy (excluding far Northsie of course), new constructions and existing. If you were the least bit saavy, 150k would get you not only the house, but a brand new grocery getter or 2 in the driveway. I did it twice (once in 1996 in far southeast Marion County and again in 2004 in Hancock County) for under 100k. Both times great neighborhoods and move-in ready homes.